Reinvent to stay relevant
There is a common misconception that retailers fail because; ‘the bank’ sent them broke by lending them too much money; the economy is not doing well; interest rates are too high; greedy landlords were charging too much rent; or new competition stole their marketshare and destroyed their sales and margin performance.
Many people believe that when retailers fail, it is often due to factors outside their control – third party influencers if you like.
In my experience, however, that is simply not the case.
The number one reason retailers fail is because their brand loses market relevance. For example:
1. Sportsgirl in the 1980s was an iconic brand, yet by 1999 it had become tired, stale, and ultimately slipped into irrelevancy and, as a consequence, administration.
2. Harris Scarfe (once Australia’s third largest department store), went into receivership in April 2001 off the back of some infamous “accounting irregularities”, however, the reality is that business had been in decline for some years and the so called “accounting irregularities” masked a level of financial underperformance that reflected a business model struggling to stay relevant.
3. In 2005 Colorado was arguably Australia’s leading specialist retail brand, and with shares trading at a high of $6.35, it became victim of Australia’s first (and only) hostile takeover by private equity. Yet, by March 2011 it too had slipped into receivership.
While there is no doubt Colorado’s balance sheet was significantly geared, the underlying core issue was that the Colorado brand had lost its mojo – it had become irrelevant to the market. In the weeks prior to its collapse, the phrase ‘aspirational BBQ wear’ was used to describe its brand position.
The symptoms of a retail brand losing relevance are relatively easy to identify:
- Product and product mix becomes stale
- Business strategy and execution becomes confused
- Technology remains outdated
- Conversations with customers and customer engagement drop off.
Establishing brand relevance and maintaining it through reinvention is more important now than ever.
It comes down to understanding the market, knowing your customers, identifying a winning product proposition, clearly articulating your brand proposition, and aligning your value chain to deliver a superior brand experience through a multitude of channels.
The difficulty that retailers are facing, however, is that the retail model lifecycle used to be seven to 10 years, but I believe it is now closer to three to five years.
The rapid pace of technology, the invasion of new competitors, the evolution of online shopping, and the impact of social media have all raised the bar on what consumers now expect from our retailers.
We have become more promiscuous in our shopping habits, shopping more brands, and craving better retail experiences.
The need to constantly reinvent and stay relevant is no longer tied to a product cycle or even the length of store leases.
Retailers have trained consumers to crave freshness and newness as new products reach their target audience faster than ever before.
Tech savvy consumers have also become more unpredictable in their buying habits and less patient with ‘old world’ retail models.
Long term sustainable retail models boil down to value chain control and this is something that best practice retailers do well.
The key to providing a sustainable omni-channel retail experience that allows customers to understand and more importantly emotionally engage in your brand proposition lies in being able to align each stage of your value chain to your vision and mission.
In my view, constant reinvention is critical to survival and constant relevance ensures retail prosperity.
Staying relevant means being in tune with market changes, understanding your customers, embracing a multi-channel shopping environment, and offering a unique brand and product experience, which will turn browsers into buyers and buyers into brand, advocates – the most powerful form of advertising.
James Stewart is partner at Ferrier Hodgson
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